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June 03, 2018

Federal Circuit Denies En Banc Review of Berkheimer and Aatrix

One of the more substantive questions in the recent interpretation of what encompasses patentable subject matter under 35 U.S.C. § 101 is whether facts should play any role in the analysis. The Supreme Court has not been perfectly clear on this issue, and the Federal Circuit appears to have taken both sides at various times. In last week's denial of en banc review for two cases, the Federal Circuit answered with an emphatic "yes." Thus, the question seems resolved. For now.

Background

It all started with Alice Corp. v. CLS Bank Int'l. There, the Supreme Court set forth a two-part test to determine whether claims are directed to patent-eligible subject matter under § 101. One must first decide whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea. If so, then one must further decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion. But generic computer implementation of an otherwise abstract process does not qualify as "significantly more," nor will elements that are well-understood, routine, and conventional lift the claim over the § 101 hurdle.

While the Supreme Court did not specify whether the well-understood, routine, and conventional determination was to be carried out as a matter of law, fact, or a hybrid of both, its earlier Mayo Collaborative Srvs. v. Prometheus Labs, Inc. decision strongly suggested that the § 101 inquiry may overlap with fact-sensitive inquiries such as novelty under § 102 in at least some situations. However, the Federal circuit has stated, in OIP Techs., Inc. v. Amazon.com, Inc., that "[p]atent eligibility under 35 U.S.C. § 101 is an issue of law reviewed de novo." But in other cases, different panels have implied that facts may be considered.

In February, the Federal Circuit published two decisions attempting to flesh out the role of facts in the § 101 analysis. In Berkheimer vs. HP Inc., the Court stated:

The question of whether a claim element or combination of elements is well-understood, routine and conventional to a skilled artisan in the relevant field is a question of fact. Any fact . . . that is pertinent to the invalidity conclusion must be proven by clear and convincing evidence. Like indefiniteness, enablement, or obviousness, whether a claim recites patent eligible subject matter is a question of law which may contain underlying facts [emphasis added].

The outcome of the Court's factual analysis was that some of Berkheimer's dependent claims recite "limitations directed to the arguably unconventional inventive concept described in the specification" and therefore the case was remanded to the District Court for fact finding.

Quickly following Berkheimer was Aatrix Software Inc. v. Green Shades Software, Inc., where the Court further explained that it has held that patent eligibility can be determined on the pleadings, but that "[t]his is true only when there are no factual allegations that, taken as true, prevent resolving the eligibility question as a matter of law." On the other hand, "[i]f there are claim construction disputes . . . either the court must proceed by adopting the non-moving party's constructions . . . or the court must resolve the disputes to whatever extent is needed to conduct the § 101 analysis, which may well be less than a full, formal claim construction." Particularly, the patentee's pleadings contained specific allegations regarding the technical improvements of, and problems solved by, the claimed invention. This was enough to also remand the case back to District Court.

The parties that came up on the short end of both of these decisions requested en banc review. The Federal Circuit published two identical opinions denying both petitions. As we have come to expect from § 101 decisions in the Federal Circuit, these cases are not without controversy. While seven of twelve judges of the en banc Court agreed with the denials (providing two different concurrences), one judge dissented.

Judge Moore's Concurrence

The first concurrence was authored by Judge Moore (who also wrote the Berkheimer and Aatrix opinions). She was joined by judges Dyk, O'Malley, Taranto, and Stoll.

Judge Moore begins with a bang, stating that "Berkheimer and Aatrix stand for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact." After noting that the Supreme Court did leave the door open to this conclusion in Mayo, her argument is largely procedural. She states that § 282(a) places the evidentiary burden of invalidating a claim on the challenger, and that the Federal Rules of Civil Procedure require that where there is a genuine dispute of material fact on summary judgment, the motion is to be denied. Similarly, a Rule 12(b)(6) motion must be denied when viewed "in the light most favorable to the plaintiff and with every doubt resolved in the pleader's favor—but disregarding mere conclusory statements—the complaint states any legally cognizable claim for relief."

She digs deeper by observing that "[i]n a situation where the specification admits the additional claim elements are well-understood, routine, and conventional, it will be difficult, if not impossible, for a patentee to show a genuine dispute." But extrinsic sources, such as a pleadings or expert testimony, could raise such a genuine dispute (so long as the points being made are not conclusory or otherwise disqualifying).

Judge Moore also makes it clear that the existence of such a factual dispute does not resolve the patent eligibility of the claims, but does require a factual inquiry:

We cannot adopt a result-oriented approach to end patent litigation at the Rule 12(b)(6) stage that would fail to accept as true the complaint's factual allegations and construe them in the light most favorable to the plaintiff, as settled law requires. The conclusion that the patent claims in Aatrix survived the motion to dismiss is not a holding that they are eligible. And the mere fact that there were sufficient allegations in the pleading to state a claim for patent infringement does not mean that the case need go to trial.

Instead, a determination of invalidity on the pleadings can be proper when there is no genuine factual dispute or when such a dispute has been resolved in the favor of the challenger. Thus, according to Judge Moore, Berkheimer and Aatrix are consistent with Federal Circuit precedent that has "properly permitted pretrial resolution of many eligibility disputes."

Judge Lourie's Concurrence

The next concurrence was written by Judge Lourie and joined by Judge Newman. In it, he appears to send up a red flag regarding § 101 jurisprudence in general, stating that "I believe the law needs clarification by higher authority, perhaps by Congress, to work its way out of what so many in the innovation field consider are § 101 problems."

He suggests that the simple § 101 inquiry set forth in the statute has become too complicated: "We now are interpreting what began, when it rarely arose, as a simple § 101 analysis, as a complicated multiple-step consideration of inventiveness ("something more"), with the result that an increasing amount of inventive research is no longer subject to patent." But Judge Lourie's proposed solution is to combine both steps of Alice into one:

But why should there be a step two in an abstract idea analysis at all? If a method is entirely abstract, is it no less abstract because it contains an inventive step? And, if a claim recites "something more," an "inventive" physical or technological step, it is not an abstract idea, and can be examined under established patentability provisions such as §§ 102 and 103. Step two's prohibition on identifying the something more from "computer functions that are 'well-understood, routine, conventional activities' previously known to the industry," is essentially a §§ 102 and 103 inquiry. Section 101 does not need a two-step analysis to determine whether an idea is abstract.

Consequently, Judge Lourie calls for the higher authority to sort things out. He sums up by stating that "[e]ven if [the denial of en banc review] was decided wrongly, which I doubt, it would not work us out of the current § 101 dilemma . . . [i]n fact, it digs the hole deeper by further complicating the § 101 analysis."

Judge Reyna's Dissent

As the sole dissenting voice, Judge Reyna employs a multi-prong attack on the reasoning set forth in the concurrences. His initial point is that, in his view, "there is no precedent that the § 101 inquiry is a question of fact." Furthermore, he believes that, under Berkheimer and Aatrix, eligibility is predominately a factual issue rather than an analysis that may consider some types of facts in certain situations. According to Judge Reyna, "Step two is thus divorced from the claims."

He also criticizes the Court for offering no "meaningful guidance to the bar, the government, or the public on how to proceed on these new grounds," contending that "we have no established parameters or guidance for what evidence we can and should consider for inventive concept purposes." His parade of horribles includes a number of purportedly unanswered questions:

Does this new factual inquiry extend to other aspects of the § 101 inquiry, such as whether a claim is directed to an abstract idea or a natural phenomenon? Can expert opinion supplant the written description? Does the court or jury determine this factual issue? What deference is due to the fact finder?

Like Judge Moore, Judge Reyna also discusses the role of extrinsic evidence in the factual inquiry. But he finds that "Aatrix removes the inventive concept inquiry from the claims and the specification, and instead places it firmly in the realm of extrinsic evidence . . . [which] is a change in our law, and is counter to guidance from the Supreme Court and our own precedent." Particularly, Judge Reyna is concerned that, given these decisions, there is no reason why the factual inquiry cannot be applied to step one of Alice as well.

But to support his concerns, he relies on statements from Diamond vs. Diehr regarding the complete separateness of the § 101 inquiry from those of § 102 and § 103. This point ignores Mayo's explicit statement that overlap may exist, Alice's reinforcement thereof, and the indisputable reality that, in practice, whether a claim element is well-understood, routine, and conventional is a factual analysis.

Judge Reyna goes on to make an analogy between a patent and contract. Each should be evaluated as a matter of law and the analysis should be limited to the four corners of the document, with factual matters rarely needing consideration. He also makes a further analogy to claim construction: "When construing patent claims, the court may rely on factual findings in some instances, but predominately construes the terms according to the claims and specification, i.e., a purely legal determination."

Conclusion

Regardless of one's position regarding the now-final outcomes of Berkheimer and Aatrix in the Federal Circuit, it is undeniable these cases are the most significant to be decided with regard to § 101 since Alice. While it remains to be seen how broadly they are applied, they have added a new twist to the eligibility analysis.

The next question, though, is whether either or both will be taken up by the Supreme Court (assuming that one of the parties requests certiorari, which is likely). On one hand, Berkheimer and Aatrix involve interactions between patentability and federal procedure that may pique the Supreme Court's interest, and may also afford it an opportunity to clarify (or further muddy) what it meant in Mayo and Alice. On the other hand, the Supreme Court may observe that the Federal Circuit is largely in agreement on the issue, and therefore may allow the lower court to scope out what can be well-understood, routine, and conventional for a while longer.

Berkheimer vs. HP Inc. (Fed.Cir. 2018)Per curiamCircuit Judge Moore concurring in the denial of the petition for rehearing en banc, joined by Circuit Judges Dyk, O'Malley, Taranto, and Stoll;Circuit Judge Lourie concurring in the denial of the petition for rehearing en banc, joined by Circuit Judge Newman;Circuit Judge Reyna dissenting from the denial of the petition for rehearing en banc.

Aatrix Software Inc. v. Green Shades Software, Inc. (Fed. Cir. 2018)Per curiamCircuit Judge Moore concurring in the denial of the petition for rehearing en banc, joined by Circuit Judges Dyk, O'Malley, Taranto, and Stoll;Circuit Judge Lourie concurring in the denial of the petition for rehearing en banc, joined by Circuit Judge Newman;Circuit Judge Reyna dissenting from the denial of the petition for rehearing en banc.

Comments

I would greatly like to hear Michael's and his readers' comments on the suggestion in the opinion that it may be easier for a defendant to prevail on a Rule 56 summary judgment motion than on a Rule 12 motion. Given such cases as Twombly and Iqbal, does Rule 56 provide an end run around Aatrix and Berkheimer? And would plaintiff's affidavits overcome that?

Does it not depend to no small degree to whom any averments must be taken in favor of?

If the facts (and pleadings) are to be taken as true as to one party or the other, then whether or not the topic here (factual basis of a legal question) comes into play, and for whom would the case be easier, are directly related, N'est ce pas?